Real estate with a strong inherent value is commercial real estate. Commercial property is a hard asset because the land and the building both have worth. Even when their properties are vacant, buying a commercial property in the right location will protect investors from a loss of income flow. Thus, the safest and most secure real estate investment is one made in commercial property.
Commercial real estate investing offers highly generous returns that are multiplied. There is an increasing need for office and commercial space as new enterprises emerge.
Reasons for investing in commercial property
Compared to other property types, commercial real estate offers exceptional appreciation over a longer length of time. Additionally, purchasing a premium commercial property through a REIT or fractional ownership may offer appealing returns with a far smaller and more affordable investment.
- Real estate investment trusts (REITs) and fractional ownership are two products that have made purchasing commercial real estate (CRE) properties more convenient and affordable. Consistent cash flow can be obtained through CRE in the form of rentals.
- However, experts advise that before making any investments, investors should thoroughly examine their financial situation, investment objectives, risk tolerance, and time frame for making a profit.
- CRE properties have a value of up to Rs. 25-30 crore. Due to the enormous ticket size, CRE investing has always been limited to UHNIs and HNIs.
- However, CRE as an asset class has essentially become more accessible thanks to innovative business models like fractional ownership and REITs. Fractional ownership enables owners to own a portion of commercial property with a ticket size as low as Rs. 25 lakhs, whereas the average minimum amount of capital required to invest in residential property ranges anywhere between Rs. 50-70 lakh and the amount may vary depending on the location of the property.
Is commercial property a better investment?
While it is true that commercial real estate offers substantially better income, it is difficult for a single investor to get into the CRE sector. Retail investors face a number of obstacles, including financial constraints, legal issues, and a lack of subject knowledge. However, choosing REITs or fractional ownership now allows for their resolution.
The pros of investing in commercial property
Stable source of high rental income: While the typical rental yield for residential real estate is 1-2 percent, it soars to an astounding 8–12 percent for commercial real estate, providing a yield that is three times greater.
Professionalism: Because the tenants in CRE typically operate well-established businesses, one may be assured of their professionalism.
Long-term commitments: Commercial tenants typically have leases that last 10 to 20 years, giving investors a solid and reliable source of return on their investment.
Value Appreciation: When compared to other property types, commercial real estate offers excellent value appreciation over a longer period of time. Additionally, purchasing a premium commercial property through a REIT or fractional ownership may offer appealing returns with a far smaller and more affordable investment.